California lawmakers pass historic foreclosure protections

California will become the first state to write into law much of the national mortgage settlement negotiated this year with the nation’s top five banks, and expand it to all mortgages, under wide-ranging legislation approved by state lawmakers on Monday.

Majority Democrats sent the homeowner protection package to Gov. Jerry Brown despite opposition from business and lending organizations and most Republican legislators.

The Assembly approved the legislation on a 53-25 vote, and the Senate followed quickly on a 25-13 vote.

The legislation would require large lenders to provide a single point of contact for homeowners who want to discuss loan modifications. It would prohibit lenders from foreclosing while the lenders consider homeowners’ request for alternatives to foreclosure. And it would let California homeowners sue lenders to stop foreclosures or seek monetary damages if the lender violates state law.

The protections would benefit all California homeowners, not just those whose mortgages are with the five banks that signed the national settlement in February. And many of the restrictions would become permanent, while those in the nationwide agreement will end after five years.

It applies to all owner-occupied residences, but not commercial or rental properties

Jose Vega drove 70 miles to Sacramento with his two young children to lobby lawmakers to pass the legislation after he spent three years battling to keep his home in the San Francisco-area city of Pittsburg.

In November 2009, he said he found a trustee sale notice posted on his door 16 days after he was placed in a loan modification program. He was put into another modification program in the spring of 2010, only to have the bank again begin foreclosure proceedings.

Vega, 52, eventually kept his home after filing for bankruptcy and getting help from the office of Democratic U.S. Sen. Dianne Feinstein. Now he and his family owe $466,000 — including the bank’s legal fees — on a home he said is worth about $200,000.

“I’m not asking for a handout. All I’m saying is, you created this mess, let’s work something out,” said Vega a member of the Alliance of Californians for Community Empowerment. “Hopefully, California will lead the way so other states will follow.”

Attorney General Kamala Harris said the compromise legislation negotiated with lawmakers “is going to bring transparency and fairness to California homeowners in a way they’ve never had before.”

Key portions of her original proposal to write the settlement into state law were stalled by opposition from some of her fellow Democrats in the Legislature, until the right to sue banks and other measures were significantly narrowed.

“This legislation can be the catalyst not only for a recovery of California’s real estate market, but a catalyst across the nation as borrowers everywhere will demand the same protections given to California borrowers, the same protections given to our families,” said Assemblyman Mike Feuer, D-Los Angeles, a member of the conference committee that negotiated the bill. “And those protections boil down to this: They ought to be treated fairly, they ought to be treated consistently.”